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Southern Economic Association
Southern Economic Journal
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Using the analytical approach made famous by Chetty  and quarterly data covering the period from 1963.4 through 1991.3, we estimate elasticities of substitution between common stocks and residential housing and between stocks and government bonds, Treasury bills, money, the sum of savings and time deposits, and corporatep aper.3W e also test whethert hese elasticities changed following the 1987 stock market crash.
We find that there is virtually no substitutabilityb etween stocks and other financial assets. Moreover, we find no evidence that asset holders are willing to substitute between stocks and housing. This last finding contradicts Runkle's suggestion that as stock returns decline, consumers may move into housing, or other durable goods. In fact, it appears that individuals consider equities to be a requirement in their portfolio, and are not willing to use other assets as substitutes. We also find that, with one exception, the stock market crash of 1987 did not have a significant impact on the substitutabilityb etween common stocks and the othera ssets. The only exception is that, following the crash, stocks and Treasury bills actually became complements.
Knapp, Dale J. and Nourzad, Farrokh, "The Substitutability of Equities and Consumer Durable Goods: A Portfolio-Choice Approach" (1994). Economics Faculty Research and Publications. 167.